To buy or not to buy
To buy or not to buy – this is my question and now it is becoming a dilemma circling in my mind.We are relatively new in Calgary. But, the urge to move out to our present place and find a house is hard to resist. There are the following factors that affects our decision whether is this the right time to acquire a house or we should wait for a while:
• Cost of renting a house
Our rent is CAN$800.00. This is quite expensive as we are just renting one room in the basement. The reason we took the basement not because we like it but it is more a necessity for us to have it upon landing to Calgary. We were advised before then that it is hard to find an available apartment to rent. For this reason, we asked the help of my wife’s relative to look for available space for us to ensure that we could have a shelter once we arrived. This will also help us to avoid staying in the hotel if this arrangement had not been made beforehand.
The rental cost is all inclusive. We don’t need to pay for utilities, TV, bed and internet connection. In contrast, it is still attractive to get a mortgage loan which the trend of the mortgage rates is going and spiraling downward. The rent we are paying will be technically converted as equity in the mortgage we intend to finalize.
• Mortgage rate spiraling downward
Recently, the bank of Canada had cut the prime rate to 4.75% so to speak. After a few days, other banks follow suit. As early as January of this year, the mortgage lending rate is 5.95%. This stroke of event leads to the reduction of mortgage rate. Presently, somebody had offered me a rate of 3.99%.
If I had taken a mortgage loan at high rate, I could be losing at least US$300.00. The loss will be too big for me to handle and I would blame myself for it.
As the prognosis is quite good for the part of the borrower, but how far the lower rate could go? At what rate it will reach the bottom? I guess nobody can exactly say that.
So far what I knew, the lending rate will still go down due to the following (1) The demand to buy a house had started to wane and supply had increased. With this basic principle, we all know that cost of this house will surely drop. When I visited sites of realtor, I saw many detached houses for sale that had already vacated by the owners. I presumed that they had bought a new house with the intention to sale their old one. It could be bad if you are caught by the lowering prices of house. You will have a mix feelings whether to hold on and keep the old house until the price goes up or immediately sell the old house while the price had just started to plunge so that you will able to save something before price had reached the bottom, (2) The announcement of Bank of Canada to further reevaluate the rate on June 10, 2008, (3) The retail sales had reduced dramatically compare last months. This is evidence that most buyers had no enough cash to sustain their insatiable wants, (4) Slow economy of USA and the much talked recession that said to be lingering around them – these also contribute a bit to Canada as USA is a major trading partner of Canada; and (5) Buyers strongly speculates that prices and rates are still going down and they tend to hold-on a little longer before buying.
• Down trend of price of the house
Although there was no significant decrease of the average price of the house in Calgary, sellers are still stubborn to further hold on or maintain their price despite the pressure as mentioned above.
The question is how far sellers can cling on and who will give in the seller or the buyer. The market price dictates by law of supply and demand. Many had speculated that the real estate boom in Calgary had reached its pinnacle and it was finally declared over in our newspaper article. In my own opinion, the average (single detached) housing price could go as low as CAN$350,000 from its peak of CAN430.000 plus.
posted by Asthong Kutchong @ 1:57 AM
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